Short shrift for profit-shifters: Conroy

Communications Minister
Stephen Conroy
insisted yesterday that legislation tabled earlier in Parliament would tackle the issue of tax lost due to profit-shifting by multinationals, against some expert advice on technology companies.

Tax experts questioned the ability of the planned laws – which relate to transfer-pricing, which deals with profit-shifting – to raise much more revenue from companies such as Google than was already the case.

But the minister stood by his prediction the reforms would address concerns about multinationals.

“We’re putting forward legislation to deal with the practices," he told a Senate estimates hearing yesterday.

Earlier this week it was reported that US-based web search company Google paid just $74,176 in tax in Australia in 2010-11 on estimated revenue of about $1.1 billion.

Senator Conroy said at the time that all multinationals should pay their fair share of tax.

Opposition communications spokesman
Malcolm Turnbull
has said such practices erode the tax base, later clarifying on his blog that he is not calling for a new tax.

In an exchange during yesterday’s hearing, which led Senator Conroy to break down in laughter at times, he said the legislation showed that “unlike Mr Turnbull", the government was not “pretending" to be concerned about the issue.

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Pressed by Liberal senator Simon Birmingham to explain how the new laws would deal with the issue, and precisely what that issue was, Senator Conroy said only that the government was introducing them.

Avoiding details, he said he did not want to pre-empt an announcement by Assistant Treasurer
David Bradbury
– an announcement which had been made almost two hours earlier.

Hitting back at the minister’s comments on his shadow Mr Turnbull –“he was the one who decided to big-note himself and then backtrack – Senator Birmingham noted: “But you’re the one that, hero-like, suggested the government had a solution coming down the pipeline."

Asked whether he had seen the legislation, Senator Conroy said it had “been through cabinet" or had “at least been canvassed and discussed".

The secretary of the Department of Broadband, Communications and the Digital Economy,
Peter Harris
, said his department had not had a chance to advise on the legislation.

“We wouldn’t be given an opportunity to comment on tax legislation. It wouldn’t fall within a million miles of the department’s responsibilities," Mr Harris said.

Introducing the transfer-pricing legislation in Parliament, Mr Bradbury said it was “critical to the integrity of the system". Cross-border trade in Australia between related parties was more than $270 billion in 2009 – half of global trades.

“Multinational companies seeking to shift profits within the group to avoid paying tax can pose a serious threat to Australia’s revenue," Mr Bradbury said.

Deloitte partner Geoff Gill said the tabled legislation was fairly similar to the draft released in March.

He said local customers dealing directly with foreign entities – as happened with the vast majority of Google’s Australian revenue, which was funnelled to its Irish entity – was not a transfer-pricing issue.

The government also said yesterday it had commissioned a Board of Taxation review of rules on permanent establishments, or places of business, in Australia for tax purposes. Mr Gill said any changes would probably not affect technology companies, unless they had branches; but they would affect banks, which would probably welcome such change.

The government also introduced tax-law changes based on budgetary measures, including slashing concessions for “golden handshakes" received by senior executives.